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In a slumping economy, it can be difficult to know exactly how to invest your money. With market indexes down across the board, there are still a few things to do to help out your investments.

Chris McClelland, founder and chief executive officer of Lucrative Investing, Inc., has made a business out of stock picks and financial advice for the everyday consumer in this economic slump. He has a few tips that may be able to turn around a declining portfolio.

“Investing is about patience and having a good understanding of what’s happening in the market as well as the government. When the direction of the market rests on decisions by the government, it is important to keep up with the news,” McClelland said. “There are, of course, a few simple things anyone can do to save their portfolio in this economy too.”

Here are a few tips McClelland suggests to helping out a portfolio in an economic downturn:

• Always make sure your portfolio is well diversified.

Diversification may be one of the most overused terms in financial lingo, but for a reason; diversification is the single most important thing anyone can do when managing their own portfolio.

To diversify, you must make sure your portfolio includes investments from all sectors of the market. Investments must be made across all different investment vehicles such as stocks, bonds and mutual funds, instead of just one.

Risk can also be diversified. Risk is a figure that can be determined when an investment decision is made. Treasury bills are an example of a zero risk investment, while a short index exchange traded fund (ETF) is considered highly risky.

When you diversify, your risk is much less than if just one investment vehicle is chosen.

• Make sure to keep accurate records.

When a portfolio is losing, the losses can be written off as tax benefits. It is important to keep accurate records so when a loss occurs, that tax benefit could be had to help offset some future profits that you may have.

Keeping accurate records will also give an indication of when it is time to leave a particular investment.

“So often we lose track of what our investments are doing from day to day. While many people don’t have the time or patience to follow their investments daily, a monthly or bimonthly check is necessary to keep track of what is happening in your portfolio,” said McClelland.

• Keep up with the national news on a regular basis.

Being busy is no excuse to let your investments falter. Your portfolio is your financial future. In an economy driven by what happens in the news from day to day it is integral to know what is happening on at least a weekly basis.

Pick up the Sunday edition of the Wall Street Journal and read about what will be happening that week. Many times stories will link certain investments to government meetings and hearings in Washington D.C.
The market indexes have been rising and falling when any news comes out of Washington because of bailouts, government loans and stimulus plans. Currently, the government’s decisions are directly affecting stock values.

“Anyone who is actively trading needs to know what is going on in the news to make his or her next move,” McClelland said. “It is always better to be one step ahead of the game than two steps behind.”

• If someone is telling you to buy into an investment on a news program, it is generally too late to make a profit on the investment.

If you watch CNBC or read newspapers for a tip to hope to keep up to date with your investment advice, chances are you will always be one step behind the curve. It takes too much time for high profit investment advice to hit the airwaves. By the time you hear about it, it is likely too late to achieve the results the advice publicized.

“Usually an investment that is on the news has already been driven higher in price and really isn’t a good place to put your money once you hear about it. There are already so many people waiting on news from companies, like quarterlies, to come out that once a station like CNBC is able to report about it, the stock has already hit the high or low on the news,” said McClelland.

By following these general investing tips, anyone can make better investment decisions, even in a recession.

Jeremy

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